After 2014 Vote, A New Regulatory Landscape for State Agency Rules

Erika Ross Gee

After 2014 Vote, A New Regulatory Landscape for State Agency Rules

This online series, written by Wright Lindsey Jennings' Erika Ross Geeand published byArkansas Business, examines changes in state agencies' rule-making procedures and the related implications to the regulatory process.

It would likely surprise many Arkansans that hundreds of state agencies, boards and commissions have the power to issue rules with the same force of law as the bills passed by the General Assembly.

Before 2015, state agencies collectively proposed several hundred new rules each year on a variety of topics (the environment, Arkansas' Medicaid program) and professions (physicians, plumbers, manicurists).

But a constitutional amendment passed in November 2014, along with an executive order from Gov. Asa Hutchinson in early 2015, has fundamentally changed the way agencies issue new rules. Only now are we starting to see the practical and political effects of these changes on the regulatory process.

The 2014 ballot measure, sponsored by Sen. Jonathan Dismang (R-Beebe) and referred by the General Assembly to the people for a vote, proposed that no administrative rule go into effect until it has been reviewed and approved by a legislative committee. The measurepassed easily with 59 percent of the vote, surprising many political observers.

The vote ended decades of wrangling between the legislative and executive branches over the appropriate balance between executive branch agencies and the Legislature. For many years, the General Assembly had a practice of "reviewing and advising" state agencies on contracts and rules that had been issued by the agency.

In 1988, this practice took center stage in what the Arkansas Supreme Court called a "legal showdown" between the Arkansas Game & Fish Commission and the Legislature, ina case called "Chaffin v. Arkansas Game and Fish Commission." In that case, the court struck down the requirement that contracts and rules could not be made effective until "reviewed" by the Legislature as a violation of the Arkansas Constitution's provisions, which prohibit one branch of government from exercising the power belonging to another branch.

The Legislature's periodic frustration with agency rules that it viewed as unnecessary or inappropriate continued after the Chaffin case, leading directly to the 2014 ballot measure and a change to the state constitution, making the Chaffin case obsolete.

Then and Now

After the constitutional amendment became effective, the General Assembly passedAct 1258 of 2015to implement it. This act established the new process for legislative approval of an agency rule and made sweeping revisions to specific rule-making provisions for many individual state agencies. In addition, the day after taking office, Hutchinson issuedExecutive Order 15-02, which requires all state agencies to obtain his approval before submitting a new or amended rule to the Legislature for its approval.

So what is the difference in the two rule-making processes and why is any of this important? There are two primary differences: 1) time and 2) politics.

Pre-2015, agencies followed the Administrative Procedures Act's requirements to publish written notice of intent to enact or change an administrative rule and allow the public to comment on the proposal. Once a final rule was adopted, the rule was "reviewed" by a legislative committee, which did not have the ability to reject a rule that it disliked. The entire process could take up to six months from an initial rule draft through the final legislative review.

But now, in order to adopt an administrative rule, an agency must first draft the rule and then obtain permission from the governor to proceed to the next step. As a practical matter, many agencies seek permission from the governor's office before ever releasing a proposed rule to the public. Once the governor's office has determined that the proposed rule does not "unnecessarily burden businesses," the agency may then file the rule with the General Assembly and publish it for comment from the public.

After considering public comment and adopting a final proposed rule, the agency will then begin its journey through the legislative process, beginning with review and approval by a Legislative Council subcommittee, with the potential of further additional reviews by the full Legislative Council, the Joint Budget Committee or a committee of the full General Assembly.

The length of this new process can vary dramatically depending on the agency involved, the relative support for the proposed rule, and the legislative calendar, but it would not be unusual to take a year or more to complete.

In sum, the new requirements have dramatically slowed an agency's ability to get a new rule in place, as well as injected multiple occasions for either the governor or a legislative body to reject a rule once it has been proposed.

From the agency perspective, taking the already-long rule-making process and adding many additional steps and checkpoints has made it very difficult for a state agency to get a new rule passed.

This has dramatically decreased the number of new rules considered: so far in 2016, there have been 109 new proposed rules considered by the Legislative Council subcommittee — a decrease of 27 percent over the same time period in 2014, when 150 new rules had been proposed, with a total of 258 rules proposed for the year.

The requirements and length of the new process can have unintended consequences that become important when, for example, a new rule is necessary to implement changes in federal law.

On the other hand, from the perspective of a legislature frustrated with rules it disliked or a business owner who believes that the state has long been burdening business by overregulating, the deceleration of the pace of rule-making is a welcome change.

As proponents of the new constitutional amendment also pointed out, state agency personnel are not elected and are not answerable to the public, so including opportunities for elected officials to comment on or even block proposed rules is an appropriate check on administrative power.

Given the 2014 election results and the current sentiments of Arkansas voters, the effect that the constitutional amendment has had on new agency rules is likely precisely what the voters intended.